Urban Settlements Development Grant 2nd and 3rd Quarter Exp of 2016 Select Committee on Appropriations National Treasury FMIP III

Subject Matters Background on the Urban Settlements Development Grant Grant Purpose The 2016 Division of Revenue Act reporting requirements USDG Performance and grant dependence

Responding to the infrastructure challenge in cities Urban areas face very different challenges to rural municipalities, and the USDG was created to respond to these differences: Metros have large own revenues and can access substantial borrowing the USDG is a “supplementary” grant, so cities must use own revenues as well to fund projects Built environment challenges are particularly complex in cities the USDG provides more flexibility for cities to plan and use the funds to meet their priorities Changing apartheid spatial development patterns requires identifying and investing in mixed developments in well-located areas cities are required to have a Built Environment Performance Plan and the USDG allows them to blend grant funds (for the poor) with own revenues and borrowed funds Rapid urbanization has led to growth in informal settlements the USDG requires cities to prioritise informal settlement upgrading

Background on USDG The Urban Settlements Development Grant (USDG) was established in 2011 resultant from the Municipal Infrastructure Grant (MIG) allocation and a portion of Human Settlement Development grant (30%). Metropolitan municipalities previously received allocations from the MIG-cities, (also a schedule 4 grant). Prior to 2009 they received the MIG. USDG is a schedule 4B grant in terms of the Division of Revenue Act and is transferred to metropolitan cities in order to supplement programmes funded from the municipal budget to facilitate investment integration targeted to spatially transform cities enabling sustainable human settlement and inclusive growth. The difference between a schedule 4 grant like USDG and a schedule 5B grant is that municipalities receiving schedule 4 grants are expected to supplement grant funding with their own revenue. The grant is allocated an amount of R10.8 billion, R11.5 billion and R12.1 billion for 2016/17, 2017/18 and 2018/19 financial years respectively. Performance against the USDG is linked to the total capital programme of municipalities.

Background on USDG ( cont) The USDG facilitates integrated planning and spatially targeted investment in the built environment Promotes urban densification Improves coordination of investment in the built environment Performance on targets against SDBIP/BEPP Bias to informal settlement upgrading Also finances capacity building in the built environment Underserved Townships Developed Area CBD Underserved Townships Underserved Townships

Grant intended purpose (outcome) The integrated sustainable human settlements and improved quality of household life outcomes to be realized are: The reduction in the real average cost of urban land for integrated development Increase in the supply of well-located land for human settlements development Improvement if spatial densities by providing household access to public amenities and socio-economic services Household access to basic and reticulation services for poor communities and related infrastructure Incremental improvements in security of tenure Improved rates of household employment through skills development and The transfer in the delivery of infrastructure.

DoRA reporting requirement USDG In terms of section 9 of the DoRA, reporting of the USDG is done on a quarterly basis on financial and non-financial information. This reporting is however in terms of the total capital programme as the USDG only supplements the capital expenditure. Transfers to metropolitan municipalities are made in compliance to the Built Environment Performance Plan(BEPP). In the case of underperformance against the grant, NT with the advice of DHS may shift funds within metros in line with NT’s processes and requirements as stipulated in Section 19(1) of the DoRA. The presentation deals with 2nd and 3rd Quarter performances in terms of the municipal financial year calendar

USDG as a percentage of the capital budget of metros

Spending performance against capex including USDG

Second Quarter 2016/17 Performance

Third Quarter 2016/17 Performance

Overall projects Buffalo City Projects list (47 projects) Nelson Mandela Bay Projects list (105 projects) Mangaung Projects list (169 projects) Ekurhuleni Projects list (156 projects) City of Johannesburg Projects list (98 projects) Tshwane Projects list (61 projects) Ethekwini Projects list (335 projects) City of Cape Town Projects list (307 projects)

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